What is Value Buy?
Value Buying means buying something where downside looks limited and there is potential for decent Upside.
Let me share one example: Realty Corporation O
Realty Corporation O is a Retail REIT (Listed in US stock market). It owns Retail properties in the US geography which it leases out to different companies in Retail business and collects Rents and then passes on the income to its shareholders. Now this sector Retail REIT has been under pressure due to rising interest rate expectations. This is how the stock is positioned on the chart:
Now you can see the stock is at very important support levels of 52-53. It has always bounced from this level and one can assume that it will do the same again. Also, the stock is trading at dividend yield of 4.8%. The company has an excellent track record of dividend payment and it consistently increases the dividend. So even if the stock does nothing for a year and just holds 52-53 levels, you will make 4.8% which is not bad considering banks don't even give 1% return.
But why the stock is trading at depressed levels?
The companies in traditional brick and mortar Retail business have been struggling and with interest rates expected to rise which will put pressure on debt servicing - there is genuine worry. And hence what one can do is make a simple assumption - Realty Corporation at current levels with 4.8% dividend yield is very attractive opportunity and one will hold it with stop loss below 51. Any decline below 51 would be considered red flag. The hope is - Stock will hold and eventually rally because there is general improvement in the economy and traditional retail is showing robust growth.
Why Retail REIT - here's healthcare REIT HCN also at important support level
HCN has a dividend yield of 5.87% which is even more attractive and it is in the right business. Welltower HCN is the largest REIT specializing in healthcare properties. With US society aging, there is going to be huge demand for senior housing and long-term care properties - the stuff HCN manages. The stock is at support level and offers very attractive dividend yield -stuff value buyers seek 🙂
I covered Best Buy in August 2017 when its price was $55 in a report titled "BEST BUY has become BEST BUY" and now it's at $72https://t.co/XpHYCZKyhs
Science of Stock Price action at work.
— Deepak Singh (@smarket) January 17, 2018
Science of Stock Price Action
The Business of Investing is not same as Investing in business. You have to know how stocks make a move and try to capitalize on that opportunity. It means following fundamental newsflow and its impact on Price Action.
Price Action is one of the best ways to make good investment decisions. That's what I teach all the time.
If you find Price Action fascinating - then Science of Stock Price is a good place to start. It's a website designed to help you learn various Price Action concepts.
Disclaimer – The state of the market notes is Deepak’s perspective on the market. The column is purely for educational purpose. Nothing contained herein is a solicitation to trade or a recommendation of a specific trade. By reading this publication you agree to make no trade relying in whole or in part on the comments of the writers